Mortgage rates hit a record low in 2020 and despite it being a challenging year, many people took this as an opportunity to enter the home buying market. These interest rates are projected to stay low throughout 2021, making it an ideal time for first-time homebuyers to enter home ownership.
Buying a home can seem like a daunting process — especially as a first-time buyer. It can be hard to determine where to start, how much to save, who to turn to for guidance and how to make the right decision on a home. Here are 4 basic tips to help you get started and have a stress-free home buying and moving journey:
1. Come up with a budget
The first and most important step to buying a home is making sure you have your finances in order, as this is a huge financial commitment. Start by getting pre-qualified to determine how much home you can actually afford depending on your monthly income and expenses. From there, you’ll know how much you need to save for a down payment. As a first-time homebuyer, a down payment typically accounts for 3.5% of the purchase price, but may vary depending on your credit score. You’ll also want to factor in additional costs such as mortgage insurance premiums, closing costs and moving expenses.
2. Connect with a mortgage lender
Once you have your savings in order and are ready to start searching for homes, you’ll want to connect with a mortgage lender. A mortgage lender is who will be issuing your home loan. Feel free to shop around for different lenders to ensure you get the best possible mortgage rate. Your lender will check all of the needed requirements for your loan, such as your credit score, income, and additional debt. You’ll need to get pre-approved for a mortgage before searching for a home so you don’t shop for homes outside of your budget. There are also great mortgage guides that you can read that will help you make better financing decisions.
3. Start shopping
Once you’ve got your pre-approval letter, it’s time to start house hunting — the most exciting part. To take the stress out of searching for homes on your own, consider hiring a real estate agent. Real estate agents will be able to help you narrow down your choices and make a smart decision on what home to buy.
4. Close on a home
Once you found a home you love, it’s time to put an offer in. Once you put an offer in and select a lender for your loan, the waiting game begins. Closing on a home can take anywhere from 30 to 40 days from when your loan was processed. Once everything is settled, you’ll go to the mortgage closing to sign all of the needed documents and pay all needed costs. After that, you’ll get the keys to your home and be able to call yourself an official home owner.
If you’re nervous about your home buying journey or don’t know where to start, this printable home buying binder created by FHA Loans can help you stay organized and successful through your entire home buying journey.